Prime minister eyes medium-term goal, tax breaks

BOJ to get behind 2% inflation target: Abe

Prime Minister Shinzo Abe said Sunday that his government will set a medium-term 2 percent inflation target with the Bank of Japan in a joint statement expected later this month to help shore up the recession-hit economy.

“What will be important is properly including the price goal of 2 percent,” Abe said during a program on NHK in his latest move to pressure the central bank to be more aggressive in combatting the country’s chronic deflation ahead of its next monetary policy meeting on Jan. 21 and 22.

Abe said the BOJ’s current goal of 1 percent inflation lacks “strong determination” and that the government and central bank will come up with “a definite goal and write that it will be 2 percent.”

Abe claimed the new target needs to be achieved under a medium-term scenario rather than a long-term one or financial markets “will not react.”

The prime minister said he believes the next BOJ governor, who will replace Masaaki Shirakawa when his tenure ends in April, should be someone who can take “bold monetary steps and is in line with our points.”

He said that a meeting with Koichi Hamada, professor emeritus of economics at Yale University, who is one of his special advisers, and other monetary policy experts is scheduled for Tuesday to discuss “what kind of person will be appropriate” to next lead the central bank.

On the TV program, Abe, who has put top priority on temporarily juicing the economy, also said the state is considering offering tax breaks to companies that increase wages.

Among other measures to revive the export-driven economy, Abe said he wants to strengthen Japan’s ties with the Association of Southeast Asian Nations, which is trying to achieve economic integration by 2015.

Abe on Wednesday is scheduled to embark on a tour of Vietnam, Thailand and Indonesia, which would be his first overseas trip since becoming prime minister for the second time after the Liberal Democratic Party won last month’s Lower House election by a landslide.

But the ASEAN tour wasn’t his first preference. Abe also said he wants to visit the United States “in February if possible” to hold talks with President Barack Obama to boost Washington’s long-standing alliance with Japan. Abe’s proposal to visit earlier was rejected by the U.S. as inconvenient.

Abe said he will tell Obama that the government will accelerate discussions toward revising the pacifist Constitution, a pillar of his campaign for the Dec. 16 election, to enable Japan to exercise the right to collective self-defense, which is coming to the defense of an ally under armed attack.

Abe also said he hoped to broaden support for amending the Constitution in the political arena, saying there are even lawmakers in the opposition who favor revision, including in the Democratic Party of Japan, which led the government for about three years until the LDP’s bruising return to power.

But Natsuo Yamaguchi, leader of the LDP’s coalition partner, New Komeito, said on the same TV program that his party remains opposed to revising the Constitution to allow collective self-defense.

When asked about Japan’s stance on whether to participate in talks on the U.S.-led Trans-Pacific Partnership agreement, Abe suggested the time is not ripe to clarify his stance.

“Our analysis of the situation is still inadequate,” he said of the free-trade pact.